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Initial public offering

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Pick a company from the internet that had an initial public offering in the past 5-10 years. Identify the IPO terms and answer the following questions:

a) Did this company need to go public to in order to meet its financial needs?
b) As an investor, would you have been willing to purchase the company?s stock at the offering price? Why or why not? Provide web-links and references.

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Solution Preview

The company chosen for this purpose is Google Inc., which went public in 2004.

The details of the Google IPO are as follows:

IPO Date: August 19, 2004
First Trade: 11:56 am ET at $100.01
Price: $85.00
Method: Modified Dutch Auction
Lead Underwriters: Morgan Stanley, Credit Suisse First Boston
Stock Symbol: GOOG
Exchange: NASDAQ
No. of Shares Offered: 19,605,052
Value of Offering: $1.67 billion
Initial Market Cap: $23.1 billion
Total Initial Shares Outstanding: 271.2 million
(33.6 mil. class A, 237.6 mil. class B)
Allocation Percentage: 74.2% of bidded shares

Source: http://www.google-ipo.com/

In my opinion, meeting financial needs was not the sole purpose for Google IPO. At the time of IPO, Google was quite profitable with lot of cash at its disposal. One of the primary reasons for going public was that it provided an easy exit strategy for venture capitalists,who had invested in the firm at startup stage. The IPO gave extraordinary stock market valuation to Google and lot of extra cash as well for further business expansion and ...

Solution Summary

The company chosen for this purpose is Google Inc., which went public in 2004.